SelectQuote, Inc. Reports Fourth Quarter 2020 and Fiscal Year 2020 Results

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Fourth Quarter 2020 - Consolidated Earnings Highlights

  • Revenue of $141 million, Up 90% Year-Over-Year
  • Net Income of $20 million, Up 56% Year-Over-Year
  • Adjusted EBITDA of $40 million, Up 106% Year-Over-Year*
  • Full-Year 2021 Revenue, Net Income and Adjusted EBITDA Expected to be in the Following Ranges:
    • Revenue Expected in a Range of $775 million to $815 million
    • Net Income Expected in a Range of $115 million to $127 million
    • Adjusted EBITDA Expected in a Range of $200 million to $215 million*

Fourth Quarter 2020 - Segment Highlights

Senior Division

  • Revenue of $88 million, Up 160% Year-Over-Year
  • Adjusted EBITDA of $33 million, Up 157% Year-Over-Year*
  • Approved Medicare Advantage Plans grew 184% Year-Over-Year

Life Division

  • Revenue of $42 million, Up 37% Year-Over-Year
  • Adjusted EBITDA of $12 million, Up 35% Year-Over-Year*
  • Ancillary premiums grew 288% Year-Over-Year

Auto & Home Division

  • Revenue of $12 million, Up 24% Year-Over-Year
  • Adjusted EBITDA of $3 million, Up 36% Year-Over-Year*
  • Total Auto & Home premiums grew 27% Year-Over-Year

SelectQuote, Inc. SLQT, reported consolidated revenue for fourth quarter 2020 of $141.4 million, which was a 90% increase over consolidated revenue for fourth quarter 2019 of $74.4 million. Consolidated net income for fourth quarter 2020 was $20.0 million, which was a 56% increase over consolidated net income for fourth quarter 2019 of $12.9 million. Finally, consolidated Adjusted EBITDA for fourth quarter 2020 was $40.1 million, which was a 106% increase over consolidated Adjusted EBITDA for fourth quarter 2019 of $19.5 million.

Consolidated revenue for the fiscal year ended June 30, 2020, was $531.5 million, an increase of $194.0 million over consolidated revenue for the fiscal year ended June 30, 2019, of $337.5 million. Consolidated net income for the 2020 fiscal year was $81.1 million, an increase of $8.5 million over consolidated net income for the 2019 fiscal year of $72.6 million. Finally, consolidated Adjusted EBITDA for the 2020 fiscal year was $154.0 million compared to consolidated Adjusted EBITDA of $105.3 million for the fiscal year 2019, an increase of $48.7 million.

Chief Executive Officer Tim Danker commented, "Our Fourth Quarter demonstrates SelectQuote's significant growth potential and we are excited to share our results following the company's successful initial public offering this past May. The power of our leading technology-enabled direct-to-consumer model paired with our 100% in-house agent-led customer service approach positions SelectQuote well to take advantage of demographic tailwinds and a large market opportunity for years to come."

Chief Financial Officer Raffaele Sadun added, "Based on our strong full-year 2020 performance, today we establish our full-year 2021 guidance with an initial forecast range of $775 million to $815 million for consolidated revenue and $200 million to $215 million for consolidated Adjusted EBITDA. We expect full-year consolidated net income to range from $115 million to $127 million for 2021."

*See reconciliation from non-GAAP measure, Adjusted EBITDA, to net income on pages 11-12

Segment Results

We currently report on three segments: 1) Senior, 2) Life and 3) Auto & Home. The performance measures of the segments include total revenue and Adjusted EBITDA. Costs of revenue, marketing and advertising, and technical development operating costs and expenses that are directly attributable to a segment are reported within the applicable segment. Indirect costs of revenue, marketing and advertising, and technical development operating costs and expenses are allocated to each segment based on varying metrics such as headcount. Adjusted EBITDA is calculated as total revenue for the applicable segment less direct and allocated costs of revenue, marketing and advertising, technical development, and general and administrative operating costs and expenses, excluding depreciation and amortization expense; loss on disposal of property, equipment, and software; share-based compensation expense; restructuring expenses; and non-recurring expenses such as severance payments and transaction costs.

Senior Division

Financial Results

The following table provides the financial results for the Senior division for fourth quarter and fiscal years ended June 30:

(in thousands)

4Q 2020

 

4Q 2019

 

% Change

 

FY 2020

 

FY 2019

 

% Change

Revenue

$

87,865

 

$

33,799

 

160

%

$

361,673

 

$

192,257

 

88

%

Adjusted EBITDA*

33,387

 

12,996

 

157

%

145,738

 

90,174

 

62

%

Adjusted EBITDA Margin

38

%

38

%

 

40

%

47

%

 

Operating Metrics

Submitted Policies

Submitted policies are counted when an individual completes an application with our licensed agent and provides authorization to them to submit it to the insurance carrier partner. The applicant may have additional actions to take before the application will be reviewed by the insurance carrier, such as providing additional information.

The following table shows the number of submitted policies for the fourth quarter and fiscal years ended June 30:

 

4Q 2020

 

4Q 2019

 

% Change

 

FY 2020

 

FY 2019

 

% Change

Medicare Advantage

59,276

 

20,746

 

186

%

264,546

 

119,562

 

121

%

Medicare Supplement

7,702

 

3,541

 

118

%

24,085

 

23,593

 

2

%

Dental, Vision and Hearing

17,212

 

11,678

 

47

%

70,018

 

36,619

 

91

%

Prescription Drug Plan

2,378

 

1,326

 

79

%

13,513

 

12,691

 

6

%

Other

2,278

 

292

 

680

%

5,890

 

5,746

 

3

%

Total

88,846

 

37,583

 

136

%

378,052

 

198,211

 

91

%

*See reconciliation from non-GAAP measure, Adjusted EBITDA, to net income on pages 11-12

Approved Policies

Approved policies represents the number of submitted policies that were approved by our insurance carrier partners for the identified product during the indicated period. Not all approved policies will go in force.

The following table shows the number of approved policies for the fourth quarter and fiscal years ended June 30:

 

4Q 2020

 

4Q 2019

 

% Change

 

FY 2020

 

FY 2019

 

% Change

Medicare Advantage

54,305

 

19,142

 

184

%

225,404

 

107,665

 

109

%

Medicare Supplement

6,362

 

2,538

 

151

%

18,102

 

16,593

 

9

%

Dental, Vision and Hearing

16,564

 

9,076

 

83

%

55,556

 

28,643

 

94

%

Prescription Drug Plan

2,481

 

1,172

 

112

%

13,009

 

11,739

 

11

%

Other

2,058

 

178

 

1056

%

4,654

 

4,102

 

13

%

Total

81,770

 

32,106

 

155

%

316,725

 

168,742

 

88

%

Lifetime Value of Commissions per Approved Policy

Lifetime value of commissions per approved policy represents commissions estimated to be collected over the estimated life of an approved policy based on multiple factors, including but not limited to, contracted commission rates, carrier mix and expected policy persistency with applied constraints. The lifetime value of commissions per approved policy is equal to the sum of the commission revenue due upon the initial sale of a policy, and when applicable, an estimate of future renewal commissions.

The following table shows the lifetime value of commissions per approved policy for the fourth quarter and fiscal years ended June 30:

(dollars per policy):

4Q 2020

4Q 2019

 

% Change

 

FY 2020

 

FY 2019

 

% Change

Medicare Advantage

$

1,256

 

$

1,263

 

(1)

%

$

1,287

 

$

1,279

 

1

%

Medicare Supplement

1,382

 

1,451

 

(5)

%

1,376

 

1,312

 

5

%

Dental, Vision and Hearing

125

 

169

 

(26)

%

140

 

152

 

(8)

%

Prescription Drug Plan

226

 

285

 

(21)

%

229

 

267

 

(15)

%

Other

(48)

 

573

 

(108)

%

34

 

621

 

(95)

%

Per Unit Economics

Per unit economics represents total Medicare Advantage and Medicare Supplement commissions, other product commissions, other revenues, and costs associated with the Senior segment, each shown as per number of approved Medicare Advantage and Medicare Supplement approved policies over a given time period. Management assesses the business on a per unit basis to help ensure that the revenue opportunity associated with a successful policy sale is attractive relative to the marketing acquisition cost. Because not all acquired leads result in a successful policy sale, all per policy metrics are based on approved policies which is the measure that triggers revenue recognition.

The Medicare Advantage and Medicare Supplement commission per MA/MS policy represents the lifetime value of commissions for policies sold in the period. Other commission per MA/MS policy represents the lifetime value of commissions for other products sold in the period, including dental, vision and hearing, prescription drug plan, and other products, which management views as additional commission revenue on our agents' core function of MA/MS policy sales. Other per MA/MS policy represents the production bonuses, renewals from policies originally sold in a prior period with insurance carrier partners whose contracts preclude us from recognizing variable consideration for estimated renewal commissions and updated estimates of prior period variable consideration based on actual policy renewals in the current period. Total operating expenses per MA/MS policy represent all of the operating expenses within the Senior segment. The Revenue to customer acquisition cost ("CAC") multiple represents total revenue per MA/MS policy as a multiple of total marketing acquisition cost, which represents the direct costs of acquiring leads which is included in marketing and advertising expense within the total operating expenses per MA/MS policy.

The following table shows per unit economics for the periods presented. Based on the seasonality of the Senior segment and the fluctuations between quarters, we believe that the most relevant view of per unit economics is on a rolling 12-month basis. All per MA/MS policy metrics below are based on the sum of approved MA/MS policies, as both products have similar commission profiles. These metrics are the basis on which management assesses the business:

 

Twelve Months Ended

June 30,

 

 

(dollars per approved policy):

2020

 

2019

 

% Change

Medicare Advantage and Medicare Supplement approved policies

243,506

 

124,258

 

96

%

Medicare Advantage and Medicare Supplement commission per MA / MS policy

$

1,293

 

$

1,283

 

1

%

Other commission per MA/MS policy

45

 

81

 

(44)

%

Other per MA / MS policy

147

 

183

 

(20)

%

Total revenue per MA / MS policy

1,485

 

1,547

 

(4)

%

Total operating expenses per MA / MS policy

(887)

 

(822)

 

8

%

Adjusted EBITDA per MA / MS policy

$

598

 

$

725

 

(18)

%

Adjusted EBITDA Margin per MA / MS policy

40

%

47

%

 

Revenue / CAC multiple

3.5X

4.0X

 

Life Division

Financial Results

The following table provides the financial results for the Life division for the fourth quarter and fiscal years ended June 30:

(in thousands)

4Q 2020

 

4Q 2019

 

% Change

 

FY 2020

 

FY 2019

 

% Change

Revenue

$

42,423

 

$

30,908

 

37

%

$

129,967

 

$

110,493

 

18

%

Adjusted EBITDA*

12,258

 

9,100

 

35

%

27,812

 

25,821

 

8

%

Adjusted EBITDA Margin

29

%

29

%

 

21

%

23

%

 

Operating Metrics

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Life premium represents the total premium value for all policies that were approved by the relevant insurance carrier partner and for which the policy document was sent to the policyholder and payment information was received by the relevant insurance carrier partner during the indicated period. Core premiums are for term life and permanent life insurance policies, while ancillary premiums are for other products. Because our commissions are earned based on a percentage of total premium, total premium volume for a given period is the key driver of revenue for our Life segment.

The following table shows core premiums and ancillary premiums for fourth quarter and fiscal years ended June 30:

(in thousands)

4Q 2020

 

4Q 2019

 

% Change

 

FY 2020

 

FY 2019

% Change

Core Premiums

$

18,965

 

$

20,256

 

(6)

%

$

75,451

 

$

75,681

 

—

%

Ancillary Premiums

19,592

 

5,047

 

288

%

37,346

 

14,286

 

161

%

*See reconciliation from non-GAAP measure, Adjusted EBITDA, to net income on pages 11-12

Auto & Home Division

Financial Results

The following table provides the financial results for the Auto & Home division for the fourth quarter and fiscal years ended June 30:

(in thousands)

4Q 2020

 

4Q 2019

 

% Change

 

FY 2020

 

FY 2019

% Change

Revenue

$

12,127

 

$

9,818

 

24

%

$

41,189

 

$

35,054

 

18

%

Adjusted EBITDA*

3,104

 

2,276

 

36

%

8,699

 

7,817

 

11

%

Adjusted EBITDA Margin

26

%

23

%

 

21

%

22

%

 

Operating Metrics

Auto & Home premium represents the total premium value of all new policies that were approved by our insurance carrier partners during the indicated period. Because our commissions are earned based on a percentage of total premium, total premium volume for a given period is the key driver of revenue for our Auto & Home segment.

The following table shows premiums for the fourth quarter and fiscal years ended June 30:

(in thousands):

4Q 2020

 

4Q 2019

 

% Change

 

FY 2020

 

FY 2019

 

% Change

Premiums

$

21,162

 

$

16,603

 

27

%

$

70,087

 

$

56,719

 

24

%

 

Fiscal Year 2021 Guidance

Based on information available as of September 09, 2020, SelectQuote is providing its guidance for the full-year ending June 30, 2021. These expectations are forward-looking statements and actual results may be materially different and are affected by the risk factors and uncertainties identified in this press release and in our annual and quarterly filings with the Securities and Exchange Commission.

The following guidance is for the full-year ending June 30, 2021:

  • Consolidated Revenue is expected to be in the range of $775 million to $815 million
  • Consolidated Net Income is expected to be in the range of $115 million to $127 million
  • Consolidated Adjusted EBITDA is expected to be in the range of $200 million to $215 million*

Review of Financial Results

SelectQuote, Inc. will host a conference call with the investment community today, Wednesday, September 9, 2020, beginning at 5 p.m. ET. Interested parties may access the conference call live over the phone by dialing (833) 350-1343 (domestic) or (236) 389-2431 (international) and using conference ID: 2669864. The event will be webcasted live via our investor relations website https://ir.selectquote.com/investor-home/default.aspx. Interested parties should register at least 10-15 minutes prior to the start of the event.

*See reconciliation from non-GAAP measure, Adjusted EBITDA, to net income on pages 11-12

Non-GAAP Financial Measures

This release includes certain non-GAAP financial measures intended to supplement, not substitute for, comparable GAAP measures. To supplement our financial statements presented in accordance with GAAP and to provide investors with additional information regarding our GAAP financial results, we have presented in this release Adjusted EBITDA and Adjusted EBITDA Margin, which are non-GAAP financial measures.

These non-GAAP financial measures are not based on any standardized methodology prescribed by GAAP and are not necessarily comparable to similarly titled measures presented by other companies.

We define Adjusted EBITDA as income before interest expense, income tax expense, depreciation and amortization, and certain add-backs for non-cash or non-recurring expenses, including restructuring and share-based compensation expenses. The most directly comparable GAAP measure is net income. We monitor and have presented in this release Adjusted EBITDA because it is a key measure used by our management and Board of Directors to understand and evaluate our operating performance, to establish budgets and to develop operational goals for managing our business. In particular, we believe that excluding the impact of these expenses in calculating Adjusted EBITDA can provide a useful measure for period-to-period comparisons of our core operating performance.

We believe that this non-GAAP financial measure helps identify underlying trends in our business that could otherwise be masked by the effect of the expenses that we exclude in the calculations of this non-GAAP financial measure. Accordingly, we believe that this financial measure provides useful information to investors and others in understanding and evaluating our operating results, enhancing the overall understanding of our past performance and future prospects.

Adjusted EBITDA is not prepared in accordance with GAAP and should not be considered in isolation of, or as an alternative to, measures prepared in accordance with GAAP. There are a number of limitations related to the use of this non-GAAP financial measure rather than net income, which is the most directly comparable financial measure calculated and presented in accordance with GAAP. These limitations include the fact that Adjusted EBITDA excludes interest expense, depreciation and amortization expense, share-based compensation expense, income tax expense, and other non-recurring expenses that are one-time in nature. In addition, other companies may use other measures to evaluate their performance, all of which could reduce the usefulness of our non-GAAP financial measures as tools for comparison.

Forward Looking Statement

This release contains forward-looking statements. These forward-looking statements reflect our current views with respect to, among other things, future events and our financial performance. These statements are often, but not always, made through the use of words or phrases such as "may," "should," "could," "predict," "potential," "believe," "will likely result," "expect," "continue," "will," "anticipate," "seek," "estimate," "intend," "plan," "projection," "would" and "outlook," or the negative version of those words or other comparable words or phrases of a future or forward-looking nature. These forward-looking statements are not historical facts, and are based on current expectations, estimates and projections about our industry, management's beliefs and certain assumptions made by management, many of which, by their nature, are inherently uncertain and beyond our control. Accordingly, we caution you that any such forward-looking statements are not guarantees of future performance and are subject to risks, assumptions and uncertainties that are difficult to predict. Although we believe that the expectations reflected in these forward-looking statements are reasonable as of the date made, actual results may prove to be materially different from the results expressed or implied by the forward-looking statements.

There are or will be important factors that could cause our actual results to differ materially from those indicated in these forward-looking statements, including, but not limited to, the following: the ultimate duration and impact of the ongoing COVID-19 pandemic, our reliance on a limited number of insurance carrier partners and any potential termination of those relationships or failure to develop new relationships; existing and future laws and regulations affecting the health insurance market; changes in health insurance products offered by our insurance carrier partners and the health insurance market generally; insurance carriers offering products and services directly to consumers; changes to commissions paid by insurance carriers and underwriting practices; competition with brokers, exclusively online brokers and carriers who opt to sell policies directly to consumers; competition from government-run health insurance exchanges; developments in the U.S. health insurance system; our dependence on revenue from carriers in our senior segment and downturns in the senior health as well as life, automotive and home insurance industries; our ability to develop new offerings and penetrate new vertical markets; risks from third-party products; failure to enroll individuals during the Medicare annual enrollment period; our ability to attract, integrate and retain qualified personnel; our dependence on lead providers and ability to compete for leads; failure to obtain and/or convert sales leads to actual sales of insurance policies; access to data from consumers and insurance carriers; accuracy of information provided from and to consumers during the insurance shopping process; cost-effective advertisement through internet search engines; ability to contact consumers and market products by telephone; global economic conditions; disruption to operations as a result of future acquisitions; significant estimates and assumptions in the preparation of our financial statements; impairment of goodwill; potential litigation and claims, including IP litigation; our existing and future indebtedness; developments with respect to LIBOR; access to additional capital; failure to protect our intellectual property and our brand; fluctuations in our financial results caused by seasonality; accuracy and timeliness of commissions reports from insurance carriers; timing of insurance carriers' approval and payment practices; factors that impact our estimate of the constrained lifetime value of commissions per policyholder; changes in accounting rules, tax legislation and other legislation; disruptions or failures of our technological infrastructure and platform; failure to maintain relationships with third-party service providers; cybersecurity breaches or other attacks involving our systems or those of our insurance carrier partners or third-party service providers; our ability to protect consumer information and other data; and failure to market and sell Medicare plans effectively or in compliance with laws. For a further discussion of these and other risk factors that could impact our future results and performance, see the section entitled "Risk Factors" in the most recent registration statement on Form S-1 (the "Prospectus") filed by us with the Securities Exchange Commission. Accordingly, you should not place undue reliance on any such forward-looking statements. Any forward-looking statement speaks only as of the date on which it is made, and, except as otherwise required by law, we do not undertake any obligation to publicly update or review any forward-looking statement, whether as a result of new information, future developments or otherwise.

About SelectQuote:

Founded in 1985, SelectQuote SLQT provides solutions that help consumers protect their most valuable assets: their families, health and property. The company pioneered the direct-to-consumer model of providing unbiased comparisons from multiple, highly-rated insurance companies allowing consumers to choose the policy and terms that best meet their unique needs. Two foundational pillars underpin SelectQuote's success: a force of more than 1,000 highly-trained and skilled agents who provide a consultative needs analysis for every consumer, and proprietary technology that sources, scores, and routes high-quality sales leads. The company has three core business lines: SelectQuote Senior, SelectQuote Life and SelectQuote Auto and Home. SelectQuote Senior, the largest and fastest-growing business, serves the needs of a demographic that sees 10,000 people turn 65 each day with a range of Medicare Advantage and Medicare Supplement plans from 15 leading, nationally-recognized carriers, as well as prescription drug plan, dental, vision and hearing plans.

SELECTQUOTE, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands)

 

 

June 30,

 

2020

 

2019

ASSETS

(Unaudited)

 

 

CURRENT ASSETS:

 

 

 

Cash and cash equivalents

$

321,065

 

 

$

570

 

Restricted cash

47,805

 

 

—

 

Accounts receivable

83,634

 

 

59,829

 

Commissions receivable-current

51,209

 

 

36,108

 

Other current assets

10,121

 

 

6,450

 

Total current assets

513,834

 

 

102,957

 

COMMISSIONS RECEIVABLE—Net

461,752

 

 

279,489

 

PROPERTY AND EQUIPMENT—Net

22,150

 

 

13,759

 

SOFTWARE—Net

8,399

 

 

4,895

 

INTANGIBLE ASSETS—NET

19,673

 

 

218

 

GOODWILL

46,577

 

 

5,364

 

OTHER ASSETS

1,408

 

 

258

 

TOTAL ASSETS

$

1,073,793

 

 

$

406,940

 

 

 

 

 

LIABILITIES, TEMPORARY EQUITY, AND SHAREHOLDERS' EQUITY

 

 

 

CURRENT LIABILITIES:

 

 

 

Accounts payable

$

22,891

 

 

$

7,634

 

Accrued expenses

14,936

 

 

6,015

 

Accrued compensation and benefits

22,228

 

 

12,566

 

Non-recourse debt—current

—

 

 

3,920

 

Earnout liability

30,812

 

 

—

 

Other current liabilities

4,944

 

 

3,087

 

Total current liabilities

95,811

 

 

33,222

 

DEBT

311,814

 

 

11,032

 

NON-RECOURSE DEBT—Net

—

 

 

10,615

 

DEFERRED INCOME TAXES

105,844

 

 

81,252

 

OTHER LIABILITIES

14,635

 

 

7,567

 

Total liabilities

528,104

 

 

143,688

 

 

 

 

 

COMMITMENTS AND CONTINGENCIES

 

 

 

 

 

 

 

TEMPORARY EQUITY:

 

 

 

Series A redeemable convertible preferred stock

—

 

 

171

 

Series B convertible preferred stock

—

 

 

501

 

Series C convertible preferred stock

—

 

 

85

 

Series D convertible preferred stock

—

 

 

40

 

Total temporary equity

—

 

 

797

 

 

 

 

 

SHAREHOLDERS' EQUITY:

 

 

 

Common stock

1,622

 

 

906

 

Additional paid-in capital

548,113

 

 

138,378

 

Treasury stock

—

 

 

(77,275)

 

Retained earnings

(2,792)

 

 

200,446

 

Accumulated other comprehensive loss

(1,254)

 

 

—

 

Total shareholders' equity

545,689

 

 

262,455

 

TOTAL LIABILITIES, TEMPORARY EQUITY, AND SHAREHOLDERS' EQUITY

$

1,073,793

 

 

$

406,940

 

SELECTQUOTE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands, except per share amounts)

 

 

Three months ended June 30,

 

Year Ended June 30,

 

2020

 

2019

 

2020

 

2019

 

(unaudited)

 

(unaudited)

 

(unaudited)

 

 

REVENUE:

 

 

 

 

 

 

 

Commission

$

122,679

 

 

$

64,998

 

 

$

476,606

 

 

$

296,000

 

Production bonus and other

18,768

 

 

9,401

 

 

54,909

 

 

41,469

 

Total revenue

141,447

 

 

74,399

 

 

531,515

 

 

337,469

 

 

 

 

 

 

 

 

 

OPERATING COSTS AND EXPENSES:

 

 

 

 

 

 

 

Cost of revenue

40,911

 

 

24,128

 

 

167,399

 

 

104,421

 

Marketing and advertising

51,911

 

 

25,838

 

 

184,157

 

 

110,265

 

General and administrative

9,504

 

 

5,074

 

 

35,283

 

 

18,169

 

Technical development

3,259

 

 

2,094

 

 

12,347

 

 

8,326

 

Total operating costs and expenses

105,585

 

 

57,134

 

 

399,186

 

 

241,181

 

 

 

 

 

 

 

 

 

INCOME FROM OPERATIONS

35,862

 

 

17,265

 

 

132,329

 

 

96,288

 

 

 

 

 

 

 

 

 

INTEREST EXPENSE, NET

(9,522)

 

 

(538)

 

 

(25,761)

 

 

(1,660)

 

OTHER EXPENSES, NET

(385)

 

 

(7)

 

 

(405)

 

 

(15)

 

INCOME BEFORE INCOME TAX EXPENSE

25,955

 

 

16,720

 

 

106,163

 

 

94,613

 

INCOME TAX EXPENSE

5,906

 

 

3,834

 

 

25,016

 

 

22,034

 

 

 

 

 

 

 

 

 

NET INCOME

$

20,049

 

 

$

12,886

 

 

$

81,147

 

 

$

72,579

 

 

 

 

 

 

 

 

 

NET INCOME (LOSS) PER SHARE:

 

 

 

 

 

 

 

Basic

$

0.15

 

 

$

0.11

 

 

$

(0.16)

 

 

$

0.70

 

Diluted

$

0.13

 

 

$

0.09

 

 

$

(0.16)

 

 

$

0.55

 

 

 

 

 

 

 

 

 

WEIGHTED-AVERAGE COMMON STOCK OUTSTANDING USED IN PER SHARE AMOUNTS:

 

 

 

 

 

 

 

Basic

120,018

 

 

86,581

 

 

97,496

 

 

85,378

 

Diluted

152,404

 

 

101,781

 

 

97,496

 

 

132,491

 

 

 

 

 

 

 

 

 

OTHER COMPREHENSIVE LOSS NET OF TAX:

 

 

 

 

 

 

 

Net unrealized losses on cash flow hedges

(1,254)

 

 

—

 

 

(1,254)

 

 

—

 

OTHER COMPREHENSIVE LOSS

(1,254)

 

 

—

 

 

(1,254)

 

 

—

 

COMPREHENSIVE INCOME

$

18,795

 

 

$

12,886

 

 

$

79,893

 

 

$

72,579

 

SELECTQUOTE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

 

 

Three months ended June 30,

 

Year Ended June 30,

 

2020

 

2019

 

2020

 

2019

 

(unaudited)

 

(unaudited)

 

(unaudited)

 

 

CASH FLOWS FROM OPERATING ACTIVITIES:

 

 

 

 

 

 

 

Net income

$

20,049

 

 

$

12,886

 

 

$

81,147

 

 

$

72,579

 

Adjustments to reconcile net income to net cash, cash equivalents, and restricted cash used in operating activities:

 

 

 

 

 

 

 

Depreciation and amortization

2,720

 

 

1,256

 

 

7,993

 

 

4,702

 

Loss on disposal of property, equipment, and software

125

 

 

170

 

 

360

 

 

221

 

Stock compensation expense

216

 

 

20

 

 

9,498

 

 

86

 

Deferred income taxes

5,889

 

 

3,813

 

 

25,007

 

 

21,991

 

Amortization of debt issuance costs and debt discount

835

 

 

24

 

 

2,266

 

 

123

 

Write-off of debt issuance costs

237

 

 

—

 

 

237

 

 

—

 

Fair value adjustments to contingent earnout obligations

375

 

 

—

 

 

375

 

 

—

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

Accounts receivable

1,472

 

 

2,633

 

 

(15,585)

 

 

(8,676)

 

Commissions receivable

(54,910)

 

 

(22,233)

 

 

(197,364)

 

 

(91,639)

 

Other assets

(4,772)

 

 

(2,143)

 

 

(3,352)

 

 

(3,031)

 

Accounts payable and accrued expenses

2,776

 

 

(258)

 

 

15,672

 

 

2,810

 

Other liabilities

5,243

 

 

108

 

 

11,970

 

 

947

 

Net cash (used in) provided by operating activities

(19,745)

 

 

(3,724)

 

 

(61,776)

 

 

113

 

CASH FLOWS FROM INVESTING ACTIVITIES:

 

 

 

 

 

 

 

Purchases of property and equipment

(3,260)

 

 

(385)

 

 

(9,446)

 

 

(3,921)

 

Proceeds from sales of property and equipment

—

 

 

—

 

 

3

 

 

—

 

Purchases of software and capitalized software development costs

(1,663)

 

 

(1,275)

 

 

(6,106)

 

 

(4,715)

 

Acquisition of business, net of cash acquired

(35,821)

 

 

—

 

 

(35,821)

 

 

—

 

Net cash used in investing activities

(40,744)

 

 

(1,660)

 

 

(51,370)

 

 

(8,636)

 

CASH FLOWS FROM FINANCING ACTIVITIES:

 

 

 

 

 

 

 

Proceeds from revolving line of credit

2,014

 

 

36,042

 

 

87,989

 

 

135,621

 

Payments on revolving line of credit

(2,014)

 

 

(34,025)

 

 

(99,021)

 

 

(144,341)

 

Net proceeds from Term Loan

—

 

 

—

 

 

416,500

 

 

—

 

Payments on Term Loan

(100,000)

 

 

—

 

 

(100,000)

 

 

—

 

Proceeds from non-recourse debt

4,450

 

 

4,150

 

 

16,575

 

 

16,200

 

Payments on other debt

(29,015)

 

 

(761)

 

 

(31,447)

 

 

(1,395)

 

Proceeds from common stock option exercises

141

 

 

773

 

 

5,506

 

 

4,300

 

Purchase of treasury stock

—

 

 

—

 

 

—

 

 

(34)

 

Cash dividends paid

—

 

 

(979)

 

 

(275,000)

 

 

(1,958)

 

Issuance of preferred stock

135,000

 

 

—

 

 

135,000

 

 

—

 

Debt issuance costs

(160)

 

 

—

 

 

(7,854)

 

 

(258)

 

Payments of costs incurred in connection with private placement

(3,784)

 

 

—

 

 

(3,784)

 

 

—

 

Payments of costs incurred in connection with initial public offering

(1,100)

 

 

—

 

 

(3,218)

 

 

—

 

Proceeds from initial public offering, net of underwriters' discounts and commissions

340,200

 

 

—

 

 

340,200

 

 

—

 

Net cash provided by financing activities

345,732

 

 

5,200

 

 

481,446

 

 

8,135

 

NET INCREASE IN CASH, CASH EQUIVALENTS, AND RESTRICTED CASH

285,243

 

 

(184)

 

 

368,300

 

 

(388)

 

CASH, CASH EQUIVALENTS, AND RESTRICTED CASH—Beginning of year

83,627

 

 

754

 

 

570

 

 

958

 

CASH, CASH EQUIVALENTS, AND RESTRICTED CASH—End of year

$

368,870

 

 

$

570

 

 

$

368,870

 

 

$

570

 

SELECTQUOTE, INC. AND SUBSIDIARIES

Adjusted EBITDA to Net Income Reconciliation

(Unaudited)

 

4Q 2020

(in thousands)

Senior

 

Life

 

Auto &

Home

 

Corp &

Elims

 

Consolidated

Revenue

$

87,865

 

$

42,423

 

$

12,127

 

$

(968

)

$

141,447

 

Operating expenses

 

(54,478

)

 

(30,165

)

 

(9,023

)

 

(7,633

)

 

(101,299

)

Other expenses, net

 

-

 

 

-

 

 

-

 

 

(10

)

 

(10

)

Adjusted EBITDA

 

33,387

 

 

12,258

 

 

3,104

 

 

(8,611

)

 

40,138

 

Interest expense, net

 

(9,522

)

Income tax expense

 

(5,906

)

Depreciation and amortization

 

(2,720

)

Non-recurring expenses

 

(1,053

)

Contingent consideration

 

(375

)

Share-based compensation expense

 

(216

)

Loss on disposal of property, equipment, and software

 

(125

)

Restructuring expenses

 

(172

)

Net income

$

20,049

 

 
 

4Q 2019

(in thousands)

Senior

 

Life

 

Auto &

Home

 

Corp &

Elims

 

Consolidated

Revenue

$

33,799

 

$

30,908

 

$

9,818

 

$

(126

)

$

74,399

 

Operating expenses

 

(20,803

)

 

(21,808

)

 

(7,542

)

 

(4,719

)

 

(54,872

)

Other expenses, net

 

-

 

 

-

 

 

-

 

 

(7

)

 

(7

)

Adjusted EBITDA

 

12,996

 

 

9,100

 

 

2,276

 

 

(4,852

)

 

19,520

 

Income tax expense

 

(3,834

)

Depreciation and amortization

 

(1,256

)

Non-recurring expenses

 

(871

)

Interest expense, net

 

(538

)

Loss on disposal of property, equipment, and software

 

(170

)

Share-based compensation expense

 

(20

)

Restructuring expenses

 

55

 

Net income

$

12,886

 

 

FY 2020

(in thousands)

Senior

 

Life

 

Auto &

Home

 

Corp &

Elims

 

Consolidated

Revenue

$

361,673

 

$

129,967

 

$

41,189

 

$

(1,314

)

$

531,515

 

Operating expenses

 

(215,935

)

 

(102,155

)

 

(32,490

)

 

(26,881

)

 

(377,461

)

Other expenses, net

 

-

 

 

-

 

 

-

 

 

(30

)

 

(30

)

Adjusted EBITDA

 

145,738

 

 

27,812

 

 

8,699

 

 

(28,225

)

 

154,024

 

Interest expense, net

 

(25,761

)

Income tax expense

 

(25,016

)

Share-based compensation expense

 

(9,498

)

Depreciation and amortization

 

(7,993

)

Non-recurring expenses

 

(3,721

)

Contingent consideration

 

(375

)

Loss on disposal of property, equipment, and software

 

(360

)

Restructuring expenses

 

(153

)

Net income

$

81,147

 

 
 

FY 2019

(in thousands)

Senior

 

Life

 

Auto &

Home

 

Corp &

Elims

 

Consolidated

Revenue

$

192,257

 

$

110,493

 

$

35,054

 

$

(335

)

$

337,469

 

Operating expenses

 

(102,083

)

 

(84,672

)

 

(27,237

)

 

(18,184

)

 

(232,176

)

Other expenses, net

 

-

 

 

-

 

 

-

 

 

(15

)

 

(15

)

Adjusted EBITDA

 

90,174

 

 

25,821

 

 

7,817

 

 

(18,534

)

 

105,278

 

Income tax expense

 

(22,034

)

Depreciation and amortization

 

(4,702

)

Restructuring expenses

 

(2,305

)

Non-recurring expenses

 

(1,691

)

Interest expense, net

 

(1,660

)

Loss on disposal of property, equipment, and software

 

(221

)

Share-based compensation expense

 

(86

)

Net income

$

72,579

 

Guidance net income to Adjusted EBITDA reconciliation, year ending June 30, 2021:

(in thousands)

Range

Net Income

$

115,000

 

 

$

127,000

 

Income tax expense

42,000

 

 

45,000

 

Interest expense

26,000

 

 

26,000

 

Depreciation and amortization

10,000

 

 

10,000

 

Share-based compensation expense

4,000

 

 

4,000

 

Non-recurring expenses

2,000

 

 

2,000

 

Contingent consideration

1,000

 

 

1,000

 

Adjusted EBITDA

$

200,000

 

 

$

215,000

 

 

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